Law Suit Update
Update on the status of the law suit:
The lawsuit alleges Insider Trading (see prior post), arguing that Pershing Square (PS) is a separate entity from Valeant and was told by Valeant about the planned hostile takeover. Allergan asked the judge to start the trial quickly (Motion to Expedite), and to not even wait to hear the views of the other side ("Ex Parte") before deciding to expedite.
Since just about everyone on both sides, myself included, considers delay to be in Allergan's interests, asking for speed is interpreted as just for show. Allergan wants to have an argument to counter assertions that the lawsuit is nothing but a delay tactic. Whether the lawsuit will produce any benefits to Allergan beyond delay tactic is unknown since we are on unexplored legal territory.
Earlier this week, PS-Valeant responded to the Ex Parte Expedite Motion. While the response is not to the overall allegation of insider trading, they provided an outline of their defense by way of framing the issue. Their defense is that all those PS-Valeant structures and Assertions that Allergan claims are shams designed to masquerade insider trading are for real, and that Allergan acknowledged as much in their own SEC filings when referring to PS and Valeant as "co-bidders." Furthermore, the sole purpose of the suit, PS claims, is to frustrate and delay the shareholders' right for a special meeting to remove the "entrenched" board.
On the (for now) germane topic of Ex Parte Expedite Motion, PS makes persuasive counterarguments -- saying that Allergan has no right to claim a timing emergency (the required ground for expediting anything, particularly on an Ex Parte basis), after they just sat for 4 months with no new information waiting until a special shareholder meeting is about to be called before filing a delay-tactics lawsuit. But then PS mooted their entire argument by saying that actually they have no objections to expediting. 
So PS filed a 14 page legal brief where they could have just said "no objection to expedite."
In any event, the Judge set August 20th (2 weeks) for a hearing just on the motion to expedite. Not a whole lot will happen at the hearing. Allergan will ask for an expedited trial. PS will say that Allergan is just pretending to want speed, but will soon enough start creating a never-ending chain of delay tactics (this way, whenever Allergan introduces a new issue or ask for a new process, PS will say -- "see we told you: DELAY TACTICS"). PS will say that they are fine with any schedule that is convenient to the court (when the other side is already asking for what you want, you just play the easy-going "whatever is convenient for the court" card). The two sides will interject some "framing language" about the overall case, but that's not the main point today; so if someone gets too long-winded the judge will cut them off. At some point, maybe as early as this hearing, PS will ask the judge to throw the whole suit out; but it is unlikely that such will be granted during a hearing on timing matters only. While the judge may set the calender from the bench, I think he will issue his decision a few days later (since he would probably have to consult his schedule with other suits).
On a side-issue: In routine hostile-takeover-defense lawsuits, the core allegation is some disclosure failures framed as a huge fraud. The standard response is for the offender to immediately file with the SEC something like "We were accused of not disclosing BLAH, we don't think we were required to disclose BLAH, but nonetheless we are hereby disclosing BLAH anyway" (of course, all this after BLAH was already published in the other side's legal complaint). Then, when they go to the first hearing, they say that the matter is moot and the case is closed (unless the other side can show that they were actually -- not just theoretically -- damaged by the disclosure delay). PS is posturing that this is just another such routine lawsuit (Insider Trading, at it's core, is, in fact, a failure to disclose issue; but unlike the routine cases, it is, in fact, also a huge fraud; with real people losing real money). True to such posturing, PS filed BLAH with the SEC.
Dan.
